CDA Working Paper: The Economic and Fiscal Effects of Ending the Federal Double Taxation of Dividends

On January 7, 2003, President George W. Bush unveiled a
multi-faceted proposal to improve the nation's economic growth. One
of the most important features of his plan calls for abolition of
the current federal double taxa­tion of corporate dividends
paid to individual shareholders. Economic analysts at the Center
for Data Analysis (CDA) at The Heritage Foun­dation found, in a
study of a dividend reform proposal similar to President Bush's,
that end­ing the double taxation of dividends would improve the
nation's economic growth, employment level, and other economic
indica­tors over the next 10 years.

For example, CDA estimates indicate that the employment level
would average 285,000 additional jobs from 2003 to 2012. In
addi­tion, CDA analysis has found that ending this double
taxation would reduce federal revenue by $64 billion over ten
years, or 79 percent less than an estimate that does not account
for the effects of greater economic activity follow­ing the
proposal's implementation. The CDA's $64 billion estimate is
slightly more than one-fifth of the $364 billion cost estimated by
the United States Department of the Treasury for President Bush's
proposal.[2] The CDA and Treasury analyses
consider slightly different proposals, but this cost difference is
largely due to the more realistic estimation method used by the
CDA.

The Treasury Department employs an erro­neous "static"
approach to estimate the reve­nue effect of tax law changes,
while the CDA uses dynamic simulation, a method that accounts for
the impact that federal tax policy may exert on economic growth.[3] Figure 1 shows that the
estimation method chosen can make a large difference in the
projected reve­nue loss. The figure compares the CDA's own
static and dynamic projections of the federal revenue change
resulting from a particular plan to end the double taxation of
dividends.

This double taxation[4] has two stages. The first stage
occurs when the federal government taxes shareholders on corporate
income through corporate taxes. The second occurs after the
corporation has distributed part of the post-tax profits to the
shareholders in the form of dividends. In this second stage, the
federal government taxes shareholders on their dividend income
through the personal income tax.

Economists have long argued that the double taxation of
dividends reduces the after-tax return on capital in the nation's
economy and thus discourages investment-in other words, purchases
of new business equip­ment and machin­ery.[5] This
reduced investment in turn weakens economic growth.
Conse­quently, eliminating the double taxation would spur
invest­ment and improve the economy's long-term growth.
Recognizing these economic benefits, several nations, including
Australia, France, Italy, Canada, Germany, Japan, and the United
Kingdom, have abolished or reduced their double taxation of
corporate divi­dends.[6]

One recent legislative proposal to abolish this double taxation
in the United States was spon­sored by Representative
Christopher Cox (R- CA).[7] The Heritage Foundation's CDA
used this proposal to illustrate the economic and federal
fis­cal effects of ending the double taxation of
divi­dends.[8] To estimate these effects,
Heritage analysts employed the DRI-WEFA U.S. Macroeconomic Model
and the Center's own Individual Income Tax Model. Assuming the
reform becomes law in September 2003, the investigation found
that:[9]

GDP IncreasesDuring the period from 2003
through 2012, the Cox proposal would increase the nation's gross
domestic prod­uct (GDP) by an inflation-adjuste[10] $32 billion per
year on average, com­pared to what it would otherwise have
been. GDP would be at least $22 billion higher in 2004 and
noless than $45
bil­lion higher in 2012 if the pro­posal were to be
implemented. (See Figure 2.)

Employment
growsThe pro­visions
in the Cox bill would enable the econ­omy to support 325,000
more jobs by 2012. (See Figure 3.) With these addi­tional jobs
in the economy, the unemployment rate would be 0.2 percent lower
throughout the period2005- 2012 than cur­rent projections
indicate.

Investment strengthensOver the
10-year period from 2003 through 2012, the proposal would result in
an aggregate increase of at least $253 billion (adjusted for
inflation) in non-residential investment. Because of this higher
level of investment, the nation's non-residential capital stock
would be $175 billion higher in 2012. (See Figure 4.)

Disposable income picks upUnder the
Cox legislation, disposable personal income would average an
inflation-adjusted $56 billion higher from 2003 through 2012. (See
Figure 5.) This higher level would raise annual dis­posable
personal income by $192 per person on average during the period.
For a family of four, this increase would correspond to $768 more
in disposable income on average each year.

Personal savings increasesThe
proposal would increase personal savings by an
infla­tion-adjusted average of $18 billion per year from 2003
through 2012.

Higher economic growth
reduces the "cost" to the Treasury by over 70 percentThe CDA's own static
estimates suggest the pro­posal would reduce federal revenue by
about $300 billion from 2003 through 2012.How­ever, the CDA's
more realistic dynamic esti­mates show that the proposal
would reduce federal revenue during the period by a total of $64
billion.(See Figure 1.) During the last five years, the proposal
would be nearly revenue neutral, since the improved economic growth
caused by the legislation would, in turn, increase tax collections.
(See Table 3). For rea­sons discussed below, these estimates do
not take into account the way in which the pro­posal's effect
on capital gains tax collections would change federal tax
revenue.

How the Double Taxation of Dividends works

The double taxation of
dividends[11] is one of the clearest
examples of the way the nation's current tax law reduces the return
on capital and, there­fore, the incentive to invest. The
following exam­ple illustrates the effect of this double
taxation.

Consider $100 in pre-tax profit earned
by a cor­poration in the flat 35 percent bracket. Suppose that,
after paying the $35 in federal corporate taxes, the firm
distributed the remaining $65 to a shareholder. Suppose, further,
that this individual was in the 27 percent personal income tax
bracket. This shareholder would pay $17.55 in personal income taxes
on these dividends. This second round of taxation would leave only
$47.45 of the original $100 in corporate profits. In other words,
for every $100 in pre-tax profits, the federal gov­ernment
would absorb approximately $52.55 in taxes.

In contrast, consider the taxes the
shareholder might have paid if that person could have received the
dividend before the firm paid corporate taxes. In this case, the
corporation would have paid the shareholder all $100 in the form of
a dividend. The shareholder would then have paid $27 in
per­sonal income taxes on the dividends, leaving that investor
with $73 out of the $100 in pre-tax cor­porate profit. As this
example shows, the double taxation of corporate dividends reduced
the share­holder's return on capital from $73 to $47.45-a
reduction of 35 percent (or $25.55). In the aggre­gate, this
lower return on capital means that there is less investment than
there would otherwise have been.

DYNAMIC SIMULATION OF
MACROECONOMIC AND FISCAL EFFECTS

Heritage economists use dynamic
simulation to project the economic and fiscal effects of proposals
for tax changes. This method contrasts with the static approach
used by the U.S. Department of the Treasury and the Congressional
Joint Commit­tee on Taxation (JCT) , which assumes that federal
tax policy does not affect economic growth.

In determining the fiscal effects of tax
change proposals, the static approach does take into account some
of the ways taxpayers alter their tax reporting and filing in
response to changes in tax law. For example, the static approach
takes into account that taxpayers could increase their
item­ized deductions or shift compensation from tax­able to
tax-exempt (or tax-deferred) forms in response to certain changes
in the tax laws. How­ever, the static approach does not take
into account the way investors and workers alter their consumption,
investment, saving, and work effort in response to changes in tax
policy. This is a major shortcoming of the static approach because
economic theory suggests that tax policy changes bring about such
alterations.[12]

Such changes in taxpayers' behavior
could affect important macroeconomic variables, including
employment, personal income, and GDP. Thus, changes in tax law
often exert an impact on the nation's economy. The static approach
necessarily ignores these impacts, leading to systematic
inac­curacies in the estimates of the fiscal effects of tax
policy changes.

In contrast, The Heritage Foundation
uses dynamic simulation in evaluating the fiscal and economic
effects of tax policy proposals. Dynamic simulation takes into
account the impact that tax policy legislation can exert on
taxpayers' economic decisions, such as consumption, investment,
sav­ing, and work effort. Dynamic simulation, there­fore,
can reflect changes in macroeconomic variables that new tax
policies can cause.

For example, if a tax rate reduction
were to strengthen national economic growth and there­fore
increase the tax base, a resultant increase in tax collections
could partially offset the federal revenue losses caused by the
rate reduction. Static analysis would not take such an offset into
account and therefore would overestimate the net decline in federal
tax collections resulting from the tax rate reduction. Dynamic
analysis would include this offset because it would take full
account of the economic benefits that the tax rate reduction could
cause. It would also capture the ways in which these benefits could
strengthen the economy, bol­ster the tax base, and ameliorate
the reduction in tax collections.

In analyzing the economic and fiscal
impact of the Cox proposal, CDA analysts made a number of
assumptions regarding the alternative minimum tax, capital gains
taxation, federal spending, and the date the bill would be enacted.
These assump­tions were as follows.

Alternative Minimum TaxThe form of the bill
submitted for consideration in the 107th Congress does not clearly
state how the divi­dend tax credit should be handled under
those parts of the tax code that establish the alterna­tive
minimum tax (AMT). Heritage Foundation analysts assumed that
taxpayers required to file under the AMT rules would be able to
take advantage of the dividend tax credit. If this were not the
case, the dividend tax relief for those taxpayers would be
negated.

Capital Gains TaxThe Cox proposal would
be expected to cause an increase in equity prices. This increase
would likely cause inves­tors to adjust their portfolios,
perhaps trigger­ing increased capital gains tax liability.
Estimating the total increase in capital gains tax collections
would require both distribu­tional and basis data that are not
readily avail­able to Heritage economists. Therefore, CDA
analysts assumed that such collections would remain unchanged
relative to the baseline
forecast.

Federal SpendingHeritage Foundation
ana­lysts assumed that Congress would make no government
program spending reductions to offset federal revenue cuts expected
with the Cox proposal. As a result, any changes in fed­eral
spending observed in the simulation are attributable solely to the
Cox proposal's effect on the national economy and, in turn, the
economy's effect on federal spending.

Dividend IncreaseHeritage analysts
assumed that ending the double taxation of dividends would increase
dividend payouts by 10 per­cent. A portion of this increase
would be caused by higher shareholder demand for divi­dends. In
response to this higher demand, cor­porations would increase
their payouts of dividends out of after-tax profits. The
remain­der of this 10 percent increase would be explained by a
reduction in the user cost of capital and a corresponding increase
in profits. Some of these higher profits would then be returned to
shareholders as higher dividends. The combined result of these two
effects was assumed to be a 10 percent increase in
divi­dends.[13]

Date of EnactmentHeritage economists
assumed that the tax reform would become law on September 30, 2003,
and apply retroac­tively to dividends received after January 1,
2003. Assuming an earlier date of enactment would have resulted in
the proposal's benefits being realized sooner.

MACROECONOMIC AND FISCAL EFFECTS
OF THE COX PROPOSAL

Heritage economists used a modified
version of the DRI-WEFA U.S. Macroeconomic Model to conduct a
dynamic simulation of the effects of Representative Cox's bill.[14] Specifically, Heritage
economists developed a baseline by adapting the DRI-WEFA
macroeconomic forecast from Sep­tember 2002 to yield the same
economic and bud­get projections as those of the Congressional
Budget Office (CBO) in August 2002.[15] Thus, the
economic baseline employed in this analysis should be comparable to
baselines used by the CBO and JCT in analyzing this legislation.
The results of the dynamic simulation are displayed in Table
2.

Specifically, the dynamic
analysis projects that the Cox proposal would:

Increase economic
growthGDP would increase by
an average of at least $32 billion per year (adjusted for
inflation) within the period from 2003 through 2012. GDP would be
an inflation-adjusted $22 billion higher in 2004 and $45 billion
higher in 2012.
(See Figure 2.)

Create more job
opportunitiesThe proposal would
increase the number of jobs by at least 325,000 in 2012. (See
Figure 3.) This increase in jobs would correspond to a decline in
the unemployment rate of no less than 0.2 percent per year over the
next 10 years. (See Figure 3.)

Increase investmentNon-residential
invest­ment would average nearly $25 billion per year (adjusted
for inflation) higher between 2003 and 2012. By the end of fiscal
year 2012, the net capital stock would be at least an
infla­tion-adjusted $174 billion higher. (See Figure 4.) The
user cost of capital would be about 5.4 percent lower in
2012.

Increase disposable
personal incomeDis­posable
personal income would increase by an inflation-adjusted average of
$56 billion or more per year from 2003 through 2012. For a family
of four, this increase in disposable income would correspond to an
average of at least $768 per year. (See Figure 5.)

Increase personal savings
and personal con­sumptionPersonal savings would
average an inflation-adjusted $18 billion higher during the 10-year
period. Personal consumption expenditures would average an
inflation-adjusted $36 billion higher than current
pro­jections.

Slightly increase consumer
pricesUnder the Cox
proposal, growth in the consumer price index would average 0.1
percent higher from 2004 through 2008. Over the final four years of
the forecast period, increases in the price level would be
virtually unchanged in comparison with those of the
baseline.

Decrease federal tax
revenue.
The Cox divi­dend proposal would reduce total federal tax
revenues by a total of $64 billion during its first 10 years. Close
to $56 billion of this reduction would take place during the first
five years, for an average of $11 billion per year. During the
final five years of the simulation period, the tax cut would be
virtually revenue neutral, reducing federal revenue by an
aver­age of less then $2 billion per year. During this latter
five-year period, increases mostly in cor­porate and Social
Security tax collections would offset expected declines in personal
income taxes. Corporate tax collections would rise because of
higher pre-tax corporate prof­its. Payroll taxes would increase
because of higher employment levels.[16] (See Table
3.)

Increase federal
spendingIf
Congress were not to reduce federal program spending to off­set
the tax revenue reductions caused by this proposal, overall federal
spending would rise. Spending would average about $13 billion
higher after ending the double taxation of divi­dends. About
two-thirds of this increase would result from additional federal
interest pay­ments. The rest would be caused by increases in
federal expenditures on income-mainte­nance programs for
federal and Social Security retirees. These increases in federal
income maintenance spending would be caused mainly by higher
consumer prices observed during the years from 2004 through 2008.
(See Table 4.)

Conclusion

President Bush
has proposed reforming the U.S. tax code to abolish the federal
double taxation on corporate dividends. Economists have long argued
that this double taxation exerts a harmful effect on the nation's
economy because it increases the user cost of capital and therefore
reduces investment in the United States. Last fall, Representative
Christo­pher Cox introduced legislation that would end this
double taxation.

This Heritage Foundation working paper
inves­tigates the 10-year economic and fiscal impact of
Representative Cox's proposal to abolish this dou­ble taxation.
It finds that the proposal would, by the year 2012, improve growth
in the nation's GDP, add hundreds of thousands of jobs to the
economy, increase investment, strengthen growth in disposable
income, and add to the nation's cap­ital stock.

Norbert J. Michel and
Alfredo Goyburu are Pol­icy Analysts, and Ralph A. Rector,
Ph.D., is a Research Fellow, in the Center for Data Analysis at
The Heri­tage Foundation.

Heritage Foundation economists in the
Center for Data Analysis (CDA) used a multi-step proce­dure to
analyze the budgetary and economic effects of the tax law change
proposed by Repre­sentative Cox.

First, CDA economists adapted the
September 2002 forecast from the DRI-WEFA U.S. Macro­economic
Model to make it congruent with the long-term budget and economic
projections pub­lished by the Congressional Budget Office in
August 2002.[17] CDA analysts then used this
fore­cast as the baseline by which to analyze the effects of
the Cox proposal.

CDA economists then used the Center's
Individ­ual Income Tax Model to generate a static estimate of
the change in federal tax collections resulting from the Cox
proposal.[18] This static estimate serves as
an essential starting point in analyzing the fiscal impact of
proposed changes in tax pol­icy. However, as explained above,
to use this esti­mate as an ultimate forecast of the federal
revenue lost under the Cox proposal would be to imple­ment an
erroneous static approach. The more accurate, dynamic approach
would take into account the proposal's macroeconomic effects. These
effects include changes in GDP, interest rates, employment levels,
price levels, investment, and other quantities. Changes in any of
these mac­roeconomic variables could affect tax revenues
sig­nificantly.

Next, the Center's analysts introduced
these tax collection changes and other implications of the Cox
proposal into the adapted DRI-WEFA U.S. Macroeconomic Model. CDA
researchers then exe­cuted the simulation and developed a
dynamic estimate of the fiscal and macroeconomic effects of the Cox
proposal. The researchers noted changes in key macroeconomic and
budget variables com­pared with their values in the original
adapted ver­sion of the model. Differences in these key
variables were attributed to the response of the U.S. economy and
federal budget to the tax policy change-that is, the dynamic
response. (See Table 2.)

The DRI-WEFA model contains a number
of variables that can be altered to simulate policy changes. Using
these variables, CDA analysts introduced static-model tax revenue
and economic behavior responses attributable to the enactment of
Representative Cox's proposal to end the double taxation on
corporate dividends. The variables altered include:

Federal Average Tax Rate on
Corporate IncomeCDA researchers
manipulated a vari­able that controls the federal average
corporate tax rate. This variable was changed so that the average
rate would remain unchanged com­pared to the baseline value, in
spite of the alteration of the federal marginal corporate tax
rate.

Federal Average Tax Rate on Personal IncomeThe Cox dividend
proposal would abolish the double taxation of corporate
divi­dend income by returning a credit that could be claimed
against personal income tax liabil­ity. CDA analysts altered
this variable to cap­ture the static reduction in federal
personal income tax collections resulting from the enactment of
Representative Cox's legislation.

Personal Dividend IncomeThe Cox divi­dend
proposal is expected to boost corporate payments of dividends. This
increase would have both short-run and long-run compo­nents. In
the short run, existing C-Corpora­tions would increase their
dividend payouts as a share of after-tax profits. They would do so
in response to shareholder demand. In the long run, the Cox
dividend proposal would reduce the user cost of capital. The lower
user cost of capital would boost corporate profits, leading to an
increase in payouts of corporate divi­dends. CDA analysts
recognized this increase through an appropriate change in a model
variable that controls personal dividend income.

Corporate ProfitsThe Cox dividend
pro­posal is expected to increase personal dividend income
compared to its level in the baseline forecast. As indicated in the
simulation, part of this increased dividend income comes from an
increase in firm profitability, as described above. The rest of the
dividend increase would represent a shift from corporate retained
earn­ings to increased payouts of dividends. CDA economists
adjusted a variable that controls after-tax corporate profits to
reflect this shift.

The bill sponsored by
Representative Cox would eliminate the double taxation of dividends
paid by C-Corporations through an imputation credit method similar
to that used in several other countries.[20] This method
adds an amount equal to the corporate layer of the tax on the
distributed dividend to the individual shareholders gross income
and then gives the shareholder a tax credit equal to that
amount.

The Cox approach has the effect of
removing the corporate layer of taxation from dividends by
returning it to shareholders at the personal level, via a
credit. Although corporations continue to pay income taxes on the
dividends they distribute, individuals receiving dividends end up
with a lower tax liability to offset the corporate income
tax.

This proposal would not change any
aspect of taxation at the corporate level. In addition, the
shareholders legal obligation to report dividends received as
ordinary personal income would remain unchanged. However, in
addition to the dividends, shareholders would have to add to their
taxable income the amount that each corporation paid in taxes on
the profits from which each divi­dend payout came.[21]

By adding the corporate tax payments on
each dividend payout to their ordinary personal income,
shareholders would be said to be gross­ing up their dividend
income. The corporate tax payments on the dividendsthat is, the
amount by which the dividend payments would be grossed upwould also
become a non-refund­able credit that shareholders could claim
against tax liability.

Thus, the gross-up amount would both add
to and subtract from each shareholders tax liability. However, the
net effect would never be a tax liabil­ity increase. The
gross-up would increase the shareholders liability by adding to
taxable income. On the other hand, the gross-up would reduce tax
liability by serving as a non-refundable credit. The effect of the
former can never add more in tax lia­bility than the latter
reduces. This is because the gross-up increases the shareholders
liability only by the amount of the gross-up multiplied by the
shareholders top marginal tax rate, while the shareholders tax
liability is reduced by up to the full amount of the
gross-up.

Table 1 provides an example illustrating
how the Cox proposal works for a hypothetical dual-earning married
childless couple in the 27 percent tax bracket[22] during 2003.[23] The
couple is assumed to own stock in a company subject to the average
corporate tax rate of 35 percent. The cor­porations tax
situation is illustrated in the section of the table labeled
Corporate Taxpayer (lines 1 to 3). This section shows that
corporate tax liabil­ity on pre-tax dividends does not change
with the proposal. In both cases, the $100 in pre-tax profits is
taxed at the corporate rate of 35 percent, leaving $65 that could
be paid to individuals in the form of dividends.

The example illustrated in the table
sets aside the effect of state and local corporate taxes and
further assumes that all of the $65 is paid to the couple in the
form of a dividend. Under both cur­rent law and the Cox
proposal, the couple adds the $65 dividend to its other taxable
income (line 8). The couples other taxable income, in turn, is
calculated the same way under both current law and the proposal
(lines 47). The couple starts with $62,000 in wage and salary
income and no other type of income (line 4). It then takes its
stan­dard deduction of $7,950 (line 5) as well as its personal
exemptions totaling $6,100 (line 6). These deductions leave $47,950
in taxable other income (line 7).

As described above, the dividend payout
the couple receives is added to their other taxable income under
both current law and the proposal (line 8). However, under the Cox
proposal, the dividend gross-up is also added to the couples
taxable income (line 9).[24] Under the proposal, the couple
applies the same rate structure to their income as under current
rules. Under current law, the couple ends up with a total tax
liability of $6,652.50 and an after-tax income of $55,412.50 (lines
15 and 16). Under the Cox proposal, because of the dividend
gross-up, the couples tax­able income (line 10) totals $48,050,
not $48,015 as under current law. This higher taxable income incurs
a pre-credit tax liability of $6,661.95 (line 11). At this point,
the filing couple applies the credit (line 12) and is left with a
total tax liability of $6,626.95 (line 15)a $25.55 reduction in tax
liability.

The Dividend Detail section of Table 1
shows how the Cox proposal reduces the taxes the couple pays on the
dividends it received. For example, under current law, the
taxpayers individual por­tion of the tax on the dividend is
$17.55.[25]

Under the Cox proposal, however, the
tax­payers individual portion of the tax on the divi­dend
is negative $8 (line 8).[26]Since the personal tax on other
income remains unchanged, the tax­payers total tax liability
falls by $25.55from $6,652.50 to $6,626.95. Therefore, the Cox
pro­posal lowers the effective personal tax on the
divi­dend by $25.55 for the couple in this example (line
20).

Under current law, the $100 in pre-tax
divi­dend income is reduced by $35 at the corporate level,
leaving $65 for the individual, which is fur­ther reduced by
$17.55 at the personal level (lines 1719). Adding the $35 tax and
the $17.55 tax results in an effective personal tax of $52.55.
(Adding lines 18 and 19 results in the total on line 20.) When the
$52.55 is subtracted from the orig­inal $100, the individual
investor receives an effec­tive dividend of only $47.45.
(Subtracting line 20 from line 17 gives the total on line
21.)

Under the Cox proposal, the effective
personal tax on the dividend is only $27 ($65 dividend + $35 credit
= $100 x 27% = $27). This means that the effective personal
dividend is $25.55 higher, for a total of $73 ($47.45 + 25.55).
This new effec­tive dividend is exactly what the individual
would have received had the original $100 been taxed only at the
personal level ($100 x (1-.27) = $73).

While the corporation pays the same tax
on the dividend income that it pays under current law, the Cox
proposal has the effect of distributing a dividend that was
untaxed at the corporate level. The end result is that one layer of
taxation on divi­dends is removed, resulting in a higher
after-tax rate of return on investment.[27]

[1]http://www.treas.gov/press/releases/kd3739.htm.[3]Forthcoming
sections of this paper further discuss the differences between
static and dynamic analysis.[4]Deborah Thomas
and Keith Sellers, "Eliminate the Double Tax on Dividends,"
Journal of Accountancy, November 1994,
and Ervin L. Black, Joseph Legoria, and Keith F. Sellers, "Capital
Investment Effects of Dividend Imputation," The Jour­nal of
the American Taxation Association, Vol. 22, Issue 2 (2000), pp.
40-59.[7]CDA analysts
assumed that the reform would be enacted on September 30, 2003, and
applicable retroactively to divi­dends paid after January 1,
2003.[10]All dollar values
listed as "inflation-adjusted" are indexed to the general 1996
price level.[11]Survey
of Current Business, November 2002, Table 2, at http://www.bea.gov/bea/ARTICLES/2002/11November/
1102irs&agi.pdf.[12]http://www.cato.org/pubs/pas/pa-463es.html.[13][15]Congressional
Budget Office, "The Budget and Economic Outlook: An Update," August
2002, at http://www.cbo.gov/
showdoc.cfm?index=3735&sequence=0.[16]To maintain
comparability with published CBO long-term projections, projections
of changes in federal spending and rev­enue are not adjusted
for inflation in this paper.[17]Congressional Budget Office, "The
Budget and Economic Outlook: An Update."[18]Thomas and
Sellers, "Eliminate the Double Tax on Dividends," and Black,
Legoria, and Sellers, "Capital Investment Effects of Dividend
Imputation."[21]The table uses
CCH projections for the 2003 federal income tax brackets (Schedule
Y-1: Married Filing Jointly and Surviving Spouses), deductions, and
exemptions. See CCH Incorporated, 2003 Master Tax Guide
(Chicago, Ill.: CCH Incorporated, 2002), pp. 25, 102, 309.[24]See second
footnote on Table 1.[27]